Should We Reduce Consumption or Produce Clean Energy?

Michael Pullinger

​The energy industry is changing rapidly, opening up new opportunities for innovative small businesses.

Businesses that have previously only been passive consumers of energy can become prosumers – (generating some energy needs on their own - Megawatts). But many cost effective opportunities in clean energy come from first reducing energy consumption (Negawatts).
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Which should you pursue first? Is one preferable to the other?

How to Compare Apples and Oranges

Once your business has completed an assessment to identify your conservation and renewable energy opportunities, you need to compare costs (up-front outlay, running costs) and benefits (energy savings, reduced maintenance).

​You can use the Levelised Cost of Energy (LCOE) to work out the average cost of each unit of energy saved (or produced) over the entire lifetime of a project.

Costs of energy can be compared using the LCOE whether you are purchasing from the utility or producing energy from wind, solar, hydro or biomass. Similarly, you can look at what it cost you to save each kWh of energy over a certain period of time.

When to Reduce?
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Your energy conservation options could include lighting upgrades, heating and ventilation system modifications or tweaking of your manufacturing processes. Some of these projects may have a low up-front cost with high potential for energy savings (highly favourable), while others will be the opposite (less favourable).

Provided the assumptions going into the assessment are correct, it is worthwhile pursuing any project with lower energy costs (LCOE) than the cost of the energy you purchase from the local utility. These projects will reduce your business operating costs in the long run.

Pursue energy conservation projects whose long-term (levelised) cost of energy saved is less than purchase from the utility.

​When to Produce?

​The good returns often make energy conservation projects the “low hanging fruit” in your arsenal - but there’s a limit. The laws of physics tell us that we can’t get something for nothing, and we can never achieve perfect efficiency.
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However, in many parts of the world, renewable energy can be produced by small businesses at lower cost than energy purchased from the local utility. For most businesses there will be a crossover point where renewable energy production becomes cheaper than the remaining energy conservation projects. At that point it’s important to bring clean energy generation into the mix. However, you will likely still purchase a portion of your energy from the local utility.

As you offset more of your initial energy consumption, renewable energy becomes more promising.

​So where to now?

​While there are altruistic reasons for pursuing sustainable energy, it's important to consider the financial returns. Green energy is now such a great business opportunity that reducing your footprint needn’t cost you. Smart choices will leave more money in your pocket in the long run, allowing you to grow your business. If sustainability is your main goal, the money saved can allow you to invest in even more clean energy.